Futures

Futures: HR, Busheling Prices Continue Slow March Higher as Capacity Issues Linger

Written by Jack Marshall

June 24, 2021

The following article on the hot rolled coil (HRC), scrap and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

Hot Rolled

In June, HR futures prices have continued to push higher on an average daily volume of just over 17,000 ST per day.  Since June 1, all the prices for each quarterly average have risen on modest volume. For example, based on June 1 and June 24 settles: Q3’21 rose $159/ST ($1,605 to $1,765), Q4’21 rose $205/ST ($1,370 to $1,575), Q1’22 rose $205/ST ($1,152 to $1,356), Q2’22 rose $120/ST ($1,024 to $1,144), Q3’22 rose $102/ST ($972 to $1,073). The average price value of the Cal’22 strip rose $128/ST from $1,020/ST value on June 1 to $1,148/ST today. In addition to the peak price month moving out to August from June’21, the forward curve shifted higher and some of the quarterly spreads shifted as Q3’21 to Q4’21 compressed (the discount narrowed from $235/ST to $190/ST), while the Q1’22 to Q2’22 discount widened out from $128/ST to $213/ST. The HR indexes continue to grind higher and the expectations appear to be shifting from week to week, which has lead to a fair amount of movement in the calendar spreads. Further supply constraints keep moving futures expectations further out the curve. 

Below is a graph showing the history of the CME Group hot rolled futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact us at info@SteelMarketUpdate.com.

futures f1 6 24 21

Scrap

July’s strong BUS finish left the market up over $65/GT. Initial expectations for August have eased somewhat from a similar upward price expectation. However, futures prices still reflect a strong move in August with the latest settlement at $675/GT. The average value for the front 12 months of the forward curve has risen $49/GT since  June 1 ($651 to $700).  A number of futures months in Q3 and Q4’21 have been trading north of $700/GT.  

Cal’22 has also risen $42/GT over the same time frame. Of particular interest is the HR minus the BUS spread, which for Q4’21 has risen from $695 per ton to $857 per ton thus far in June.

Below is another graph showing the history of the CME Group busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here.

futures f1 6 24 21

Jakc Marshall, SMU Contrubutor

Jack Marshall

Jack Marshall has over 30 years of experience trading and marketing financial futures and swaps, including currencies. Before joining Crunch Risk in 2012, Marshall was responsible for Forex Origination for BofA Merrill Lynch in their Chicago office. For Crunch Risk, he focuses on Ferrous scrap futures and helps manage client communications. Marshall is a regular contributor to the Steel Market Update newsletter covering topics including steel and steel scrap futures. He is NFA registered Associated Person and holds a Series 3 license. Marshall can be reached at jack.marshall@crunchrisk.com.

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